Sunday, October 22, 2017

Do you have a handle on the finances of your business?



Keeping up with all of the day-to-day demands of operating a small business can cause owners to lose sight of the company’s overall fiscal situation. Owners should be proactive with company finances; here are a few tips that may be useful:







Benchmark
Know where you are and what your targets should be. A plan is useful and need not be too formal. As milestones are reached know how you are going to get to the next level and what financing may be needed.

Liquidity

How liquid is the business? Having immediate access to cash can reduce borrowing costs. With funds available you are able to make the most of capital-intensive business opportunities.

Profitability
If sales are growing but there seems too often to be a cash shortage after bills are paid, the business may have profitability issues. Monitoring profit margins instead of gross sales will help determine what the business is actually earning.


Stay involved
Business liquidity, profitability and other key ratios are important to evaluating the business – but only if owners spend time reviewing the information. It is necessary to schedule time every month to actually review the data.


While it is not necessary to review financial data daily, consistent reviews are the only way to know if the business is improving or regressing. Owners owe it to themselves and to shareholders to stay aware of the financial health of the business.

I hope the tips are useful, let me have your thoughts.

gerry@polarisgroupmc.com       
               
       

Sunday, October 8, 2017

Is your Business Ready to Sell?


If you’re thinking about selling your business, think it through carefully. Selling should never be a spur of the moment decision. There are a number of factors to consider including if you should sell, when is the best time to sell, and what you need to consider before selling. Here are a few of the issues to help determine if it is the right time to sell:



1. Business readiness
Make sure you can produce two to three years of tax returns that are accurate and show maximum profitability to get the best price for your business.

2. Team approach
It's important for entrepreneurs to figure out whose services will be needed to help get the best price for their business. Do you need an accountant? How about an appraiser, attorney, consultant and business broker? The buyer is typically going to have a good team to go over your business, so you should, too.

3. Coping with Change
Rapidly changing technology, increasing globalization and other business trends can prove too much for some business owners. Keep your eyes trained three or four years down the road, and if you don’t believe you can keep up, sell before your failure to adapt catches up with you.

4. Diversification
Can the business thrive without the owner or without a key customer? If a buyer is concerned that a business is too dependent on the owner or a single customer, he may take his offer elsewhere. "A good business can operate when the owner is on vacation and has good revenue diversification, where no one customer represents more than five percent of the business.

5. Valuation
An incorrect valuation is often the main reason businesses don’t sell. If your price is too high, buyers don't take you seriously and won't bother to investigate further. If it is too low you will leave something on the table. Most sellers don't know the value of their business. Ask a broker, get a valuation. Ask an intermediary that is experienced in selling your type of business. Having a firm idea of what you would like to achieve is ideal but keep it within reason.

I hope these few thoughts help clarify some of the key factors that can help you maximize the potential return if you sell your business. Please let me know your thoughts. Gerry@polarisgroupmc.com